Sunday, August 1, 2021

Google Q2 2021 Earnings

Numbers

  • Revenue: $61.88B (up 61% YOY, would be 35% assuming Q4 2019 revenue in Q2 2020)
  • Operating Income: $19.3B (up from 6.3B YoY) 
  • Net Income - 18.5B (up from 6.9B YoY)  

Segment Breakdown

  • Google search 35B vs 21.3B in Q2, 2020 (up 64%)
  • Google Cloud revenue: $4.6 billion vs. 3.0B in Q1 2020 (up 53%)
  • YouTube ads: $7 billion vs. 3.8B in Q2 2020 (up 84%)
  • Traffic Acquisition Costs (TAC): $10.9 billion  vs. $6.6B in Q2, 2020
  • Google Network 7.5B (4.7B in Q2 2020) up (59%)
  • Google Other(hardware, playstore, non-advertising youtube revenues) 6.6B  (5.1B in Q2, 2020) (up 30%)

Operating Income breakdown

  • Google Service - 22.3B
  • Cloud lost 500M in Q1. Prediction is that in 2021 Cloud will be cash flow positive
  • Other bets lost .9B
  • Google ends the quarter with 135B in cash

Highlights and Opinions from earnings call


Saturday, July 10, 2021

Apple vs MSFT 2003

$AAPL vs $MSFT in 2003. Bill Gates couldn’t fathom that Steve Jobs and Apple were out-innovating them. “Strange” is a word he uses throughout this email. He was truly confused.



 

Sunday, May 2, 2021

Microsoft Q3 2021 Earnings

SuSummary
  • Revenue : $41.7 billion (up 19% from 35B in Q3 2020)
  • Operating income : $17.0 billion (up 31% from 12B in Q3, 2020)
  • Net income: $15.5 billion GAAP and $14.8 billion non-GAAP, and increased 44% and 38%, respectively (10.7B in Q3, 2020)
  • Diluted earnings per share was $2.03 GAAP and $1.95 non-GAAP, and increased 45% and 39%,respectively
  • GAAP results include a $620 million net income tax benefit explained in the Non-GAAP Definition section below
SeSegment Breakdown
PrProductivity and Business Processes
  • Office Commercial products and cloud services revenue increased 14% (up 10% in constant currency) driven by Office 365 Commercial revenue growth of 22% 

  • Dynamics products and cloud services revenue increased 26% (up 22% in constant currency) driven by Dynamics 365 revenue growth of 45% (up 40% in constant currency)

  • LinkedIn revenue increased 25% (up 23% in constant currency)

  • Office Consumer products and cloud services revenue increased 5% (up 2% in constant currency) and Microsoft 365 Consumer subscribers increased to 50.2 million

Revenue in Intelligent Cloud: $15.1 billion up 23%

  • Server products and cloud services revenue increased 26% (up 23% in constant currency) driven by Azure revenue growth of 50% (up 46% in constant currency)

Revenue in More Personal Computing was $13.0 billion and increased 19% (up 16% in constant currency)

  • Windows OEM revenue increased 10%
  • Windows Commercial products and cloud services revenue increased 10% (up 7% in constant currency)
  • Xbox content and services revenue increased 34% (up 32% in constant currency)
  • Search advertising revenue excluding traffic acquisition costs increased 17% (up 14% in constant currency)
  • Surface revenue increased 12% (up 7% in constant currency)

Subscriptions
  • Microsoft 365 Consumer subscriptions grew to 47.5 million, up 28% year over year.
  • In identity, Azure AD has more than 425 million monthly active users.
  • Xbox Live has more than 100 million monthly active users
  • Game Pass now has 18 million subscribers. 
  •  47 million Microsoft 365 personal and family subscribers



$MSFT Azure revenue growth

- Q1 2018: 90%

- Q2 2018: 98%

- Q3 2018: 93%

- Q4 2018: 89%

- Q1 2019: 76%

- Q2 2019: 76%

- Q3 2019: 73%

- Q4 2019: 64%

- Q1 2020: 59%

- Q2 2020: 62%

- Q3 2020: 59%

- Q4 2020: 47%

- Q1 2021: 48%

- Q2 2021: 50%

- Q3 2021: 50%






Friday, April 30, 2021

Apple Q1 2021 Earnings

 Summary

  • Revenue up 54 percent to new March quarter record
  • Net income of $23.6 billion, diluted earnings per share of $1.40 and operating cash flow of $24 billion were all March quarter records by a wide margin.
  • Services and Mac revenue reach new all-time high
  • International sales accounted for 67 percent of the quarter’s revenue.
  • If you look at how the iPhone did around the world, we had the top five models of smartphone in the US, the top selling, the top two in urban China, four out of the top five in Japan, the top four in the UK and the top six in Australia. 
  • Trends playing into Mac : Work from home, M1 chips, remote learning, last 3 quarters for Macs have been the best 3 quarters ever
  • Trends playing into iPad : Work from home, M1 chips, remote learning
  • Watch : 75% people who bought an Apple watch were new to the product
  • Q2 guidance being lower - we reached supply demand balance only during the March quarter, which makes obviously the sequential decline steeper than usual. this 3 or $4 billion of supply constraints that Tim just said, primarily on iPad and Mac.
  • my view would be as the stores get back up to speed, fully up to speed, we should be able to increase some of the accessory sales. Although I think we're doing fairly well at the moment. So it's not something that we're not doing well. Online has been much more beneficial and much more productive than we would have guessed going into this.
  • Keep in mind that our Europe segment is a very broad version of Europe because it includes Western Europe, which has done very, very well. And then, Eastern Europe and it goes into the Middle East. Even India is part of Europe. And those emerging markets have done incredibly well, significantly better than company average.
  • Apple Pay continues to expand geographically, launching in Mexico and in South Africa, bringing our payment service to six continents.
  • In the enterprise market, customers across many industries are accelerating their adoption of iPhone 12 and 5G as a key platform for the future of their business.
    Delta Airlines, for example, is putting iPhone 12 and 5G connectivity into the hands of flight attendants so they can provide the best passenger service possible as air travel rebounds. Openreach in the UK has started equipping tens of thousands of field engineers with iPhone 12 to speed up their deployment of broadband services to homes around the country. And UCHealth, a large healthcare provider in Colorado, was able to reduce per patient vaccination time from three minutes to only 30 seconds largely by moving from PC stations to iPhones. This has allowed their staff to rapidly scan and register new patients and vastly increase their daily vaccination capacity.

  • Net cash was 83 billion at the end of the quarter.


Category Breakdown

  • iPhone - 47.9 B vs 28.9 B in Q1, 2020 (up 65%)
  • Mac - 9.1 B vs 5.3 B in Q1, 2020 (up 71%)
  • iPad - 7.8 B vs 4.3 B in Q1, 2020 (up 81%)
  • Wearbales - 7.8 B vs 6.2 B in Q1, 2020 (up 25%)
  • Services - 16.9 B vs 13.3 B in Q1, 2020 (up 27%)
  • Revenue - 89.5 B vs 58.3 B in Q1, 2020 (up 54%)
  • Net income - 52 B (~60% operating margin) 

Geography Breakdown

  • Americas 34.3 B vs 25.4 B in Q1, 2020
  • Europe 25.2 B vs 14.2 B in Q1, 2020
  • China 17.7 B vs 9.4 B in Q1, 2020
  • Japan 7.7 B vs 5.2 B in Q1, 2020
  • APAC 7.7 B vs 3.8 B in Q1, 2020

Historical Apple revenue in Q2:


2021: $89.6 billion

2020: $58.3 billion

2019: $58.0 billion

2018: $61.1 billion

2017: $52.9 billion

2016: $50.6 billion

2015: $58.0 billion

2014: $45.7 billion

2013: $43.6 billion

2012: $39.2 billion

2011: $24.7 billion

2010: $13.5 billion

2009: $9.1 billion


Thesis

  • Trends : remote learning, creator economy
  • Competitive advantage : m1 chip driving adoption
  • Geography : Strength in international markets


Tuesday, April 27, 2021

Decision Making


 

Google Q1 2021 Earnings

Numbers

  • Revenue: $55.31B (exp $51.61B)
  • EPS: $26.29 (exp $15.64)
  • Operating Income: $16.44B (exp $12.02B) 
  • Net Income - 17.9B
  • Approved Buyback Of Additional $50B Class C Stock
  • Google has 3 businesses growing at greater than 45% run rate and revenue of 4 bn a quarter
  • Alphabet structure is a scam, the goal is to burn some money to lower operating margin to reduce antitrust scrutiny
Segment Breakdown
  • Google search 31B vs 24.5B in Q1, 2020
  • Google Cloud revenue: $4.05 billion vs. $4.07 billion, according to FactSet estimates(2.7B in Q1 2020) up 48%
  • YouTube ads: $6.01 billion vs. $5.70 billion, according to StreetAccount (4B in Q1 2020) up 50%
  • Traffic Acquisition Costs (TAC): $9.71 billion  vs. $9.25
  • Google Network 6.8B
  • Google Other(hardware, playstore, non-advertising youtube revenues) 6.4B (4.4B in Q1 2020) up 45%
Operating Income breakdown
  • Google Service - 19.5B
  • Cloud lost 900M in Q1. Prediction is that in 2021 Cloud will be cash flow positive
  • Other bets lost 1.1B
  • Google ends the quarter with 135B in cash
Highlights and Opinions from earnings call
  • 100M searches for COVID and related health information
    • Retail, tech and CPG
    • Helping American airlines predict traffic on untapped routes
    • Searches for local and businesses are up 80% - accelerated curbside pickup
    • Omnichannel fulfillment approach using search and maps
    • Job seekers looking for jobs, top employment websites
    • What are the key drivers you are thinking of driving search growth ?
      • Queries - are you point place for customers to turn to when they need information
      • Ads Coverage - what percentage of the queries are commercial
      • Click through rates - next generation machine learning
      • CPC - quality of traffic, conversion rates, ROI - work closely with partners
  • Maps - indoor live view, navigate airports, malls and stations using AR
  • Google news showcase - 1 bn investment - UK, Italy, Argentina, Australia
  • Youtube 
    • educational videos - 77% respondents used for learning new skills
    • Youtube shorts 6.5 daily views as of march 
    • Brand and performance goals. Advertisers are using youtube to reach people they cant find anywhere else, awareness to consideration to action. More people here than all of TV.
    • Direct response, make it easier for people to buy. Purchases from creators directly from youtube. Product feeds can be directly brought on the video ads. 
    • 2B monthly logged in users and 2B hours per day
    • Violative view rate 1.6% down 70% from 2017
  • Other revenues : Google play > Youtube > Hardware
  • Chrome OS - 10 years - Chromebook fighting for K-12 education
  • Signing multi-year multi-product partnerships through Cloud
    • Univision, T-Mobile
    • Very strong customer momentum in data cloud - Twitter
    • AI/ML - Financial services, fraud and risk - HSBC
    • Bigquery - business intelligence cloud
    • Operational efficiency - migrating data center to Google Cloud
    • Google workspace - nurses and retail store workers
  • Waymo - 100 rides per week in Phoenix
  • Calico - clinical stage programs for Cancer
  • 7B investment in 2021 in US alone
2021 themes
  • Building and providing useful services
  • Quality of information, privacy and safety
  • Strong Execution 
  • Building sustainable value - Long term growth with financially sustainable businesses
Putting the Q1 numbers into historical perspective
Google's revenue in Q1 - this is a 34% jump in quarterly numbers
2021: $55.3 billion
2020: $41.2 billion
2019: $36.3 billion
2018: $31.1 billion
2017: $24.8 billion
2016: $20.3 billion
2015: $17.3 billion
2014: $15.4 billion
2013: $12.9 billion
2012: $10.6 billion
2011: $8.6 billion
2010: $6.8 billion
2009: $5.5 billion







Sunday, February 14, 2021

Modern Leadership

  1. Influence > Authority
  2. Intent / Mindset > Current Talent
  3. Context > Content
  4. Inception > Orders
  5. Why > Who > What
  6. Ears > Eyes > Mouth
  7. Questions > Answers
  8. Prevention > Solution
  9. Presence > Multitasking
  10. Self-management > People-management 

Wednesday, February 10, 2021

Entrepreneurial Superpowers

Here are some leadership lessons I picked up working in pre-IPO startups and FAANG in Silicon Valley. 
  1. Being able to work with and manage difficult people puts you at a huge advantage
  2. Fear, pride, anger, excitement cloud your ability to make sound logical decisions. Making non-emotional decisions with impartial information is a super power. 
  3. Crisp and clear communication is a super power.  You cannot be crisp if you are not precise. Do not hide uncertainty and do not bury nuance. 
  4. Rigor and quality are essential to building and decision making. You cant build well and make good decisions without structured thinking and mental models. 
  5. Likeability is key people like to do business with people they like. Leading by fear doesn't work.
  6. Develop structured thinking, operate from clear first principles, create frameworks that make it easy for those principles to come to life across teams, products and people and communicate them effectively. 
  7. Every leader's main job is sales : selling your idea, vision including hiring, managing, leading.
  8. Being able to change your mind based on data, facts, new opinions. Surround yourself with people who will challenge your opinions. Build a culture around youself that is inclusive and invites that feedback. The biggest challenge as you go up the ladder is that the real feedback dries up. 
  9. Saying NO. You sometimes have to step over the pennies to pick up the dollars. 

Tuesday, February 2, 2021

Mindset : The new psychology of success

 The Book in Three Sentences

  1. Skills can be cultivated through effort.
  2. People with a growth mindset thrive on challenges.
  3. The fixed mindset: “I can’t do it”. The growth mindset: “I can’t do it yet”.

The Five Big Ideas

  1. The view you adopt for yourself profoundly affects the way you lead your life.
  2. “Believing that your qualities are carved in stone—the fixed mindset—creates an urgency to prove yourself over and over”.
  3. “People in a growth mindset don’t just seek challenge, they thrive on it”.
  4. “The growth mindset does allow people to love what they’re doing—and to continue to love it in the face of difficulties”.
  5. “Those with the growth mindset found success in doing their best, in learning and improving. And this is exactly what we find in the champions”.

Mindset Summary

  • “[Children with a growth mindset] knew that human qualities, such as intellectual skills, could be cultivated through effort”.
  • “Not only were [the children with a growth mindset]not discouraged by failure, they didn’t even think they were failing. They thought they were learning”.
  • “What are the consequences of thinking that your intelligence or personality is something you can develop, as opposed to something that is a fixed, deep-seated trait?”
  • “Robert Sternberg, the present-day guru of intelligence, writes that the major factor in whether people achieve expertise ‘is not some fixed prior ability, but purposeful engagement’.”
  • “For twenty years, my research has shown that the view you adopt for yourself profoundly affects the way you lead your life”.
  • “Believing that your qualities are carved in stone—the fixed mindset—creates an urgency to prove yourself over and over”.
  • “This growth mindset is based on the belief that your basic qualities are things you can cultivate through your efforts. Although people may differ in every which way—in their initial talents and aptitudes, interests, or temperaments—everyone can change and grow through application and experience”.
  • “Why waste time proving over and over how great you are, when you could be getting better? Why hide deficiencies instead of overcoming them?”
  • “The passion for stretching yourself and sticking to it, even (or especially) when it’s not going well, is the hallmark of the growth mindset”.
  • “The fixed mindset makes you concerned with how you’ll be judged; the growth mindset makes you concerned with improving”.
  • “When you enter a mindset, you enter a new world. In one world—the world of fixed traits—success is about proving you’re smart or talented. Validating yourself. In the other—the world of changing qualities—it’s about stretching yourself to learn something new. Developing yourself”.
  • “Benjamin Barber, an eminent sociologist, once said, ‘I don’t divide the world into the weak and the strong, or the successes and the failures…. I divide the world into the learners and non-learners’.”
  • “People in a growth mindset don’t just seek challenge, they thrive on it”.
  • “We gave fifth graders intriguing puzzles, which they all loved. But when we made them harder, children with the fixed mindset showed a big plunge in enjoyment”.
  • “For [people with a growth mindset] it’s not about immediate perfection. It’s about learning something over time: confronting a challenge and making progress”.
  • “‘Becoming is better than being’. The fixed mindset does not allow people the luxury of becoming. They have to already be”.
  • “People with the growth mindset know that it takes time for potential to flower”.
  • “College students, after doing poorly on a test, were given a chance to look at tests of other students. Those in the growth mindset looked at the tests of people who had done far better than they had. As usual, they wanted to correct their deficiency. But students in the fixed mindset chose to look at the tests of people who had done really poorly. That was their way of feeling better about themselves”.
  • “John Wooden, the legendary basketball coach, says you aren’t a failure until you start to blame. What he means is that you can still be in the process of learning from your mistakes until you deny them”.
  • “French executive Pierre Chevalier says, ‘We are not a nation of effort. After all, if you have savoir-faire [a mixture of know-how and cool], you do things effortlessly’.”
  • “People with the growth mindset, however, believe something very different. For them, even geniuses have to work hard for their achievements”.
  • “They may appreciate endowment, but they admire effort, for no matter what your ability is, effort is what ignites that ability and turns it into accomplishment”.
  • “The growth mindset does allow people to love what they’re doing—and to continue to love it in the face of difficulties”.
  • “Those with the growth mindset found success in doing their best, in learning and improving. And this is exactly what we find in the champions”.
  • “Those with the growth mindset found setbacks motivating. They’re informative. They’re a wake-up call”.
  • “People with the growth mindset in sports (as in pre-med chemistry) took charge of the processes that bring success—and that maintain it”.


Drive : The surprising truth about what motivates us

 The Book in Three Sentences

  1. Much of what we know about motivation is wrong.
  2. Tasks are either: (1) Algorithmic—you pretty much do the same thing over and over in a certain way, or (2) Heuristic—you have to come up with something new every time because there are no set instructions to follow.
  3. The carrot and stick approach to motivation is flawed.

The Five Big Ideas

  1. Researchers have found that extrinsic rewards can be effective for algorithmic tasks—those that depend on following an existing formula to its logical conclusion. But for more right-brain undertakings—those that demand flexible problem-solving, inventiveness, or conceptual understanding—contingent rewards can be dangerous.
  2. Goals that people set for themselves and that are devoted to attaining mastery are usually healthy. But goals imposed by others can sometimes have dangerous side effects.
  3. We have three innate psychological needs—competence, autonomy, and relatedness.
  4. Research shows that the secret to high performance isn’t our biological drive or our reward-and-punishment drive, but our third drive—our deep-seated desire to direct our own lives, to extend and expand our abilities, and to live a life of purpose.
  5. The new approach to motivation has three essential elements: (1) Autonomy—the desire to direct our own lives; (2) Mastery—the urge to get better and better at something that matters; and (3) Purpose—the yearning to do what we do in the service of something larger than ourselves.

Drive Summary

  • “When money is used as an external reward for some activity, the subjects lose intrinsic interest for the activity.”—Edward Deci
  • “When children didn’t expect a reward, receiving one had little impact on their intrinsic motivation. Only contingent rewards—if you do this, then you’ll get that—had the negative effect. Why? ‘If-then’ rewards require people to forfeit some of their autonomy.”
  • “People use rewards expecting to gain the benefit of increasing another person’s motivation and behavior, but in so doing, they often incur the unintentional and hidden cost of undermining that person’s intrinsic motivation toward the activity.”—Jonmarshall Reeve
  • “Rewards, by their very nature, narrow our focus. That’s helpful when there’s a clear path to a solution. They help us stare ahead and race faster. But “if-then” motivators are terrible for challenges like the candle problem. As this experiment shows, the rewards narrowed people’s focus and blinkered the wide view that might have allowed them to see new uses for old objects.”
  • “[Teresa] Amabile and others have found that extrinsic rewards can be effective for algorithmic tasks—those that depend on following an existing formula to its logical conclusion. But for more right-brain undertakings—those that demand flexible problem-solving, inventiveness, or conceptual understanding—contingent rewards can be dangerous.”
  • “Instead of increasing the number of blood donors, offering to pay people decreased the number by nearly half.”
  • “Goals that people set for themselves and that are devoted to attaining mastery are usually healthy. But goals imposed by others—sales targets, quarterly returns, standardized test scores, and so on—can sometimes have dangerous side effects.”
  • “Goals may cause systematic problems for organizations due to narrowed focus, unethical behavior, increased risk taking, decreased cooperation, and decreased intrinsic motivation. Use care when applying goals in your organization.”
  • “Get people fired up with the prospect of rewards, and instead of making better decisions, as Motivation 2.0 hopes, they can actually make worse ones.”

The Seven Deadly Flaws of Carrots and Sticks

  1. They can extinguish intrinsic motivation
  2. They can diminish performance
  3. They can crush creativity
  4. They can crowd out good behavior
  5. They can encourage cheating, shortcuts, and unethical behavior.
  6. They can become addictive
  7. They can foster short-term thinking
  • “The Sawyer Effect: practices that can either turn play into work or turn work into play.”
  • “The essential requirement: Any extrinsic reward should be unexpected and offered only after the task is complete.”
  • “First, consider nontangible rewards.”
  • “Praise and positive feedback are much less corrosive than cash and trophies.”
  • “Second, provide useful information.”
  • “Give people meaningful information about their work.”
  • “In brief, for creative, right- brain, heuristic tasks, you’re on shaky ground offering ‘if- then’ rewards. You’re better off using ‘now that’ rewards. And you’re best off if your ‘now that’ rewards provide praise, feedback, and useful information.”
  • “[Self-determination theory] argues that we have three innate psychological needs—competence, autonomy, and relatedness.”
  • “Human beings have an innate inner drive to be autonomous, self-determined, and connected to one another. And when that drive is liberated, people achieve more and live richer lives.”
  • “In the midst of play, many people enjoyed what Csikszentmihalyi called ‘autotelic experiences’—from the Greek auto (self) and telos (goal or purpose). In an autotelic experience, the goal is self-fulfilling; the activity is its own reward.”
  • “The highest, most satisfying experiences in people’s lives were when they were in flow.”
  • “In flow, goals are clear. You have to reach the top of the mountain, hit the ball across the net, or mold the clay just right. Feedback is immediate. The mountaintop gets closer or farther, the ball sails in or out of bounds, the pot you’re throwing comes out smooth or uneven.”
  • “Most important, in flow, the relationship between what a person had to do and what he could do was perfect. The challenge wasn’t too easy. Nor was it too difficult. It was a notch or two beyond his current abilities, which stretched the body and mind in a way that made the effort itself the most delicious reward. That balance produced a degree of focus and satisfaction that easily surpassed other, more quotidian, experiences.”
  • “In flow, people lived so deeply in the moment, and felt so utterly in control, that their sense of time, place, and even self-melted away. They were autonomous, of course. But more than that, they were engaged. They were, as the poet W. H. Auden wrote, ‘forgetting themselves in a function.’”
  • “The science shows that the secret to high performance isn’t our biological drive or our reward-and-punishment drive, but our third drive—our deep-seated desire to direct our own lives, to extend and expand our abilities, and to live a life of purpose.”
  • “At the end of each day, ask yourself whether you were better today than you were yesterday.”
  • “One of the best ways to know whether you’ve mastered something is to try to teach it.”
  • The new approach to motivation has three essential elements: (1) Autonomy—the desire to direct our own lives; (2) Mastery—the urge to get better and better at something that matters; and (3) Purpose—the yearning to do what we do in the service of something larger than ourselves.




Books I am reading